Monday, August 9, 2010

Another Graves Amendment Update -- New York

For all actions commenced on or after August 10, 2005, the "Graves Amendment" provides vehicle renters and lessors with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits. This amendment to the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: A Legacy for Users ("SAFETEA") provides in relevant part that:

[a]n owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if-

(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and

(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). 49 U.S.C. § 30106(a).

For purposes of the Graves Amendment, section 30102(a)(6) of Chapter 301 of Title 49 of the United States Code, entitled Motor Vehicle Safety, defines "motor vehicle" as "a vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line."

Motor vehicle rental and leasing defendants use the Graves Amendment as a tort defense to indirect or vicarious liability under state laws such as New York's Vehicle & Traffic Law § 388. In pertinent part, that statute provides:

§ 388. Negligence in use or operation of vehicle attributable to owner.

1. Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner. Whenever any vehicles as hereinafter defined shall be used in combination with one another, by attachment or tow, the person using or operating any one vehicle shall, for the purposes of this section, be deemed to be using or operating each vehicle in the combination, and the owners thereof shall be jointly and severally liable hereunder.

2. As used in this section, "vehicle" means a "motor vehicle", as defined in section one hundred twenty-five of this chapter, except fire and police vehicles, self-propelled combines, self-propelled corn and hay harvesting machines and tractors used exclusively for agricultural purposes, and shall also include "semitrailer" and trailer"as defined in article one of this chapter, whether or not such vehicles are used or operated upon a public highway. For the purpose of this section, self-propelled caterpillar or crawler-type equipment while being operated on the contract site, shall not be defined as motor vehicles.

Plaintiff claimed that while a passenger on an "Access-A-Ride" vehicle he was caused to fall out of his wheelchair and sustained an injury. Plaintiff commenced this personal injury action against the New York City Transit Authority (NYCTA), the vehicle's titled owner and lessor, the vehicle's driver, and the vehicle's registered owner, American Transit, Inc. NYCTA cross-moved for summary judgment dismissing plaintiff's complaint on the ground that the Graves Amendment applied to exempt it from vicarious liability under New York Vehicle & Traffic Law § 388. Plaintiff opposed that cross motion, arguing that NYCTA was not entitled to summary judgment because the NYCTA is not in the business of renting or leasing motor vehicle, and thus not within the class to which the Graves Amendment applies and/or protects.

In denying the NYCTA's cross motion, New York County Supreme Court Justice Donna M. Mills ruled that NYCTA had not established that it was "engaged in the trade or business of renting or leasing motor vehicles":

At issue here, however, is 49 USC § 30106. In the case at bar, plaintiffs dispute that NYCTA is in the business of renting or leasing motor vehicles. The lease between the NYCTA and American Transit for the subject vehicle in question is not dispositive on the issue of whether the NYCTA is in the business of renting or leasing vehicles. As such, since no other evidence has been presented by NYCTA to establish that it is in the business of renting or leasing vehicles, its cross-motion must be denied.

Plaintiff alleged that he sustained personal injuries when his car was struck in the rear by the car owned by the defendant rental car company, Elrac Inc., and driven by the defendant Jermaine L. Darden. The complaint specifically alleges that the plaintiff's injuries were a result of negligence on the part of the "defendants in that said motor vehicle was owned, operated, maintained and controlled in a careless, reckless and negligent manner, in violation of the defendants' respective duties of care[.]" Prior to discovery, Elrac moved to dismiss the complaint against it for failure to state a cause of action pursuant to CPLR Rule 3211(a)(7).

In denying Elrac's motion, Queens County Supreme Court Justice Devin P. Cohen held that: (1) Elrac failed to attach complete copies of the plaintiff's complaint and Elrac's answer to its motion papers; (2) Elrac failed to introduce a properly authenticated copy of the rental agreement; and (3) the complaint alleged negligent maintenance of the rental vehicle by Elrac, an exception to the Graves Amendment:

A motion to dismiss for failure to state a cause of action is a motion on the pleadings, which requires the court to analyze the sufficiency of the plaintiff's initial complaint. Here, the defendant fails to attach all of the relevant pleadings to its motion. The third page of the plaintiff's complaint is missing from the documents the defendant offers in support of its motion. Defendant also fails to attach a copy of its own answer, but does not state that its motion is one for pre-answer dismissal. Thus, the court cannot determine from defendant's papers whether the defendant asserted a failure of the plaintiff to state a cause of action or cited the Graves Amendment as a defense in its pleading. These reasons alone would be sufficient to deny defendant's motion.

Even if the defendant had attached the necessary supporting documents, the affidavit by its regional loss control manager is insufficient to authenticate the purported rental agreement between Elrac and the defendant driver as a business record. "[A] requirement of evidence of authenticity...applies to all writings whose relevancy depends upon authorship by a particular person" (Prince, Richardson on Evidence § 9-101 [Farrell 11th Ed]). Here, the affidavit states that Elrac is in the business of renting motor vehicles to the general public, that it uses rental agreements which are created in the regular course of business and that it rented the vehicle involved in the accident to Mr. Darden in the regular course of its business. However, the affidavit fails to authenticate the particular rental agreement annexed to the motion, or to state that it was created in the regular course of business. It is unclear whether this was a mere oversight, or whether the deponent did not have sufficient personal knowledge regarding the document. In either case, the purported rental agreement is not admissible as a business record. Thus, the defendant fails to establish that the subject vehicle was "rent[ed] or lease[d]...to a person," and that the collision occurred "during the period of the rental or lease" (see 49 USC § 30106[a]). Absent such a showing, the defendant fails to establish by admissible evidence that it qualifies for immunity under the Graves Amendment.

Furthermore, had the defendant's supporting documents been adequate, the court would still find that the substance of the plaintiff's complaint is sufficient on its face. The Graves Amendment confers immunity from liability upon a rental or leasing owner only if "there is no negligence or criminal wrongdoing on the part of the owner" (see 49 USC § 30106[a]). "On a CPLR 3211 motion to dismiss, the court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Nonnon v. City of New York, 9 NY3d 825, 827 [2007] [quoting Leon v. Martinez, 84 NY2d 83, 87-88 (1994)]). In this case, there is no question that plaintiff's complaint alleges that Elrac was negligent in its maintenance of the vehicle in question.

In this case, the United States Court of Appeals for the Second Circuit ruled that the Graves Amendment, which applies to "any action commenced on or after the date of enactment of this section [August 10, 2005]", did not apply to this action, which was originally commenced prior to that date.

Plaintiff Merchants originally commenced this action for contribution from defendant Mitsubishi Motor Credit Association (MMCA) on October 20, 2003, prior to the August 10, 2005 effective date of the Graves Amendment. After the action was removed to federal court, and because no judgment had yet been filed in the related underlying personal injury action by the time Merchants filed its suit for contribution, on July 11, 2005, the district court declared Merchants' suit unripe and dismissed it without prejudice to reopen "if and when a judgment is entered in the state court case and plaintiff makes a payment on that judgment."

Merchants later made payment on that judgment and requested that this action be reopened, which it was in June 2006, after the effective date of the Graves Amendment. MMCA moved for summary judgment based on the Graves Amendment

Although neither party argued for its applicability, on September 25, 2007, the district court granted MMCA's then-pending motion for summary judgment on the ground that the Graves Amendment precluded Merchants' claims. The district court reasoned, under state law, that although the instant action was first filed in October 2003, which was before the Graves Amendment's effective date, the suit was prematurely filed and was therefore not justiciable at that time. After acknowledging that there is "no indication on the docket sheet that a new summons and complaint was ever filed when the case was re-opened[,].... the parties to the lawsuit have remained the same, and plaintiff's claim is unchanged," the district court held that the suit "commenced" for purposes of the Graves Amendment only after it became justiciable and was reopened in June 2006. Since June 2006 is after the effective date of the Graves Amendment, the district court found that the case was preempted by federal law and granted summary judgment in favor of MMCA.

The Second Circuit Court of Appeals disagreed and found that this action was commenced for purposes of the Graves Amendment when Merchants originally filed it in state court in October 2003. Thus, the district court erred in granting summary judgment to MMCA based on the Graves Amendment:

Here, it was not necessary for the district court to go beyond the face of the statute to discuss the justiciability or prematurity of the suit as originally filed. If state law applies here by virtue of our construction of the Graves Amendment, CPLR § 304(a) is unambiguous. Although the district court's concerns about "reward[ing] plaintiff's improper filing and subvert[ing] Congress' decision to bar suits, such as the instant one," Merchants Ins. Group, 525 F. Supp. 2d at 314, are well-taken, the suit at issue commenced when it was originally filed in state court, even though it was later dismissed and then reopened. We see no reason, moreover, that the result would not be the same with reference to federal procedural principles. Under the Federal Rules of Civil Procedure, "[a] civil action is commenced by filing a complaint." Fed. R. Civ. P. 3. Thus, this action "commenced" when it was originally filed in state court on October 20, 2003, and is not barred by application of the Graves Amendment.

Penske Truck Leasing leased a truck to International Paper Company, which in turn allowed the defendant Gilliard, who allegely lacked a valid commercial driver's license, to drive the truck. Plaintiff was allegedly injured when the leased truck, driven by Gilliard, struck her vehicle in the rear. Penske moved for summary judgment dismissing the plaintiff's complaint against it based on the Graves Amendment. Penske argued that plaintiff's negligent entrustment cause of action against it was non-cognizable because it entrusted the truck to International Paper Company, rather than to Gilliard.

In granting Penske's motion, Suffolk County Supreme Court Justice Thomas F. Whelan ruled that the Graves Amendment applied to exempt Penske from vicarious liability under New York Vehicle & Traffic Law § 388:

The Graves Amendment, now codified at 49 USC § 30106, renders the vicarious liability provisions of VTL § 388 inapplicable to an owner or affiliate owners of motor vehicles who are engaged in the trade or business of renting or leasing motor vehicles. "This statute is applicable to all actions commenced on or after August 10, 2005 and has been enforced as pre-empting the vicarious liability imposed upon commercial lessors by Vehicle and Traffic Law § 388." (Graham v Dunkley, 50 AD3d 55, 852 NYS2d 169 [2d Dept 2008]). The applicability of the Graves Amendment to this action and to the moving defendant is not disputed. Accordingly, those portions of Penske's motion wherein it seeks summary judgment dismissing so much of the plaintiffs' complaint that charges Penske with vicarious liability for the occurrence of the accident and the damages sued upon, are granted (see Gluck v Nebgen, 72 AD3d 1023, 898 NYS2d 881 [2d Dept 2010]).

The remaining portions of Penske's motion wherein it seeks dismissal of the plaintiffs' second cause of action wherein they seek to hold Penske liable by reason of its purported negligent entrustment of the truck are also granted. While it is clear that the Graves Amendment has no application to claims of negligence against a commercial lessor of vehicles that are not premised on the vicarious liability provisions of VTL § 388 (see Palacios v Aris, Inc., 2010 WL 933754 [ED NY 2010]), the plaintiffs' claims of negligent entrustment on the part of moving defendant Penske are not cognizable. It is well established that claims for negligent entrustment rest upon the degree of knowledge the supplier of a chattel has or should have had concerning the entrustee's propensity to use the chattel in an improper or dangerous fashion (see Hamilton v Beretta USA Corp., 96 NY2d 222, 727 NYS2d 7 [2001); Zara v Perzan, 185 AD2d 236, 586 NYS2d 139 [1992]).

Here, it is not disputed that Penske did not entrust the subject truck to Gilliard, the operator of such truck. Rather, Penske leased the truck to International who in turn, entrusted it to Gilliard. The moving papers sufficiently established that Gilliard was not an employee, servant or agent of Penske or otherwise known to it. The opposing papers submitted by the plaintiffs failed to raise any question of fact regarding knowledge, actual or constructive, on the part of moving defendant Penske that its entrustee, International, had a propensity to use leased vehicles in an improper or dangerous fashion. The fact that Gilliard may not have possessed a valid driver's license, pursuant to which, he could legally operate the subject truck does not warrant a denial of Penske's motion as it relates to the plaintiffs' negligent entrustment claims (see generally Hamilton v Beretta USA Corp., 96 NY2d 222, supra ; see also Cook v Shapiro, 58 AD3d 664, 871 NYS2d 714 [2d Dept 2009]; Weinstein v Cohen, 179 AD2d 806, 579 NYS2d 693 [2d Dept 1992]).

In this action for personal injuries allegedly sustained when a bus in which plaintiffs were passengers was involved in a collision with a truck rented by defendant Cancel from defendant U-Haul Co. of Arizona, U-Haul appealed from Bronx County Supreme Court's denial of its motion to dismiss the complaint.

In AFFIRMING the order appealed from, the First Department ruled that the lower court properly denied U-Haul's motion becauase the plaintiffs' complaint alleged negligent maintenance of U-Haul's truck:

Following the case law precedent set by Kings County Supreme Court Justice Wayne Saitta in Meigel v. Schulman and Graca v. Krasnik, Kings County Supreme Court Jack M. Battaglia denied the defendant car lessor's motion for summary judgment with leave to renew within 30 days after substitution of counsel for the defendant vehicle driver:

In its Supplemental Affirmation, the Law Firm contends, among other things, that it does not have a conflict of interest since any liability as against PV Holding (the leasing company) would only have been vicarious through Vehicle and Traffic Law § 388, which is barred by the Graves Amendment. In this regard, the Law Firm contends that the other causes of action alleged against PV Holding, i.e., negligent entrustment and respondeat superior, were not addressed in Plaintiff's Bill of Particulars, and do not have any merit. (See e.g. Drake v Karahuta, (2010 WL 376388, *3 [WDNY 2010] ["Plaintiff's failure to allege any basis for independent negligence against [the leasing company] (other than vicarious liability under NY Vehicle and Traffic Law § 388) negates any possibility of independent liability by [the leasing company]. Therefore, defense counsel does not have a conflict of interest in asserting a Graves Amendment defense.")

The Rules of Professional Conduct, which were promulgated as joint rules of the Appellate Divisions of the Supreme Court, effective April 1, 2009, and which supersede the former Part 1200 (Disciplinary Rules of the Code of Professional Responsibility), govern the resolution of the issue of the Law Firm's potential conflict of interest. Rule 1.7(a) of the Rules of Professional Conduct provides that, "Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that . . . the representation will involve the lawyer in representing differing interests." (Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [a].) Paragraph (b) sets forth necessary conditions that allow an attorney to represent parties with differing interests.

The first question, then, is whether, under the circumstances of this case, a reasonable lawyer would conclude that the Law Firm's representation of both the driver Mario Regina and the leasing company PV Holding will involve the Law Firm in "representing differing interests". In its Supplemental Affirmation, the Law Firm suggests that this determination should be made as of the time when the issue of the potential conflict of interest is raised, i.e., as of now. In this regard, the Law Firm points out that the issue was raised by the Court sua sponte after disclosure was complete, and only after the Law Firm brought a motion for summary judgment.

Nonetheless, the language of Rule 1.7(a) requires that the determination be made as of the time it becomes apparent to a reasonable lawyer that the dual representation "will involve the lawyer in representing differing interests." For reasons that will follow, in this case a reasonable lawyer should have been aware of the conflict of interest upon receipt of Plaintiff's Complaint. (See e.g. Graca v Krasnik,20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], *3 [Sup Ct, Kings County, Saitta, J.]["The conflict exists at the point the attorney recognizes that one of their two clients may have a Graves Amendment defense.")

* * * * *

In Drake v Karahuta, (2010 WL 376388), a federal magistrate held, under similar circumstances, that a law firm representing both the driver and leasing company does not have a conflict of interest in asserting a Graves Amendment defense where "discovery is complete, and plaintiff has neither alleged nor sought to prove any basis other than vicarious liability for its claim against [the leasing company]." (See id. at *2.)

Although neither Graca, Meigel, nor Drake analyzed the issue of the potential conflict of interest under the new Rules of Professional Conduct, they are still persuasive on the question of potential conflict of interest under the facts presented here. Indeed, it has been noted that the Rules of Professional Conduct "include[s] approximately three-quarters of the former [Code of Professional Responsibility], with the remaining one quarter coming from the ABA's Model Rules", and that the new rules do not necessarily eviscerate the holdings in cases decided based upon the Code of Professional Responsibility. (See Delorenz v Moss, 24 Misc 3d 1218 [A], 2009 NY Slip Op 51519[U], *2 [Sup Ct, Nassau County, Palmieri, J.]

Graca and Meigel stand for the proposition that a law firm representing both the leasing company and the driver has an inherent conflict of interest where the law firm seeks to move for dismissal of the complaint only as against the leasing company since the driver would be left bearing full liability. Drake stands for the proposition that a law firm, representing both the leasing company and the driver, that raises the Graves Amendment defense to dismiss the action against the leasing company has a conflict of interest only where there are allegations asserted against the leasing company other than vicarious liability under Vehicle and Traffic Law § 388, presumably because the Graves Amendment bars the imposition of liability against the leasing company solely "by reason of being the owner of the vehicle" (see 49 USC § 30106[a].)

This Court agrees with Graca and Meigel that a law firm has an inherent conflict of interest in representing both the leasing company and the driver, regardless of whether the only claim against the leasing company is vicarious liability based upon Vehicle and Traffic Law § 388. As noted in Graca, the fact that a party asserts a Graves Amendment defense does not mean that the driver would have no basis to oppose that party's summary judgment motion. (See Graca v Krasnik, 20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], at *3.) In this regard, a party asserting the Graves Amendment as a basis for summary judgment dismissal of a Vehicle and Traffic Law § 388 cause of action must establish prima facie that it was engaged in the business of leasing vehicles, a fact which a driver having independent counsel may challenge. (See id. at *3.)

* * * * *

Even though this Court has concluded that the Law Firm has a concurrent conflict of interest since "a reasonable lawyer would conclude that . . . the representation will involve the lawyer in representing differing interests"(see Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [a]), the Law Firm may still represent both clients if conditions set forth in Rule 1.7(b) of the Rules of Professional Conduct are met. Rule 1.7(b) provides that, "Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing." (Rules of Professional Conduct [22 NYCRR 1200.0] Rule 1.7 [b].)

In its Supplemental Affirmation, the Law Firm fails to even address the criteria set forth Rule 1.7(b). In any event, it is clear that the conditions specified in Rule 1.7(b) have not been met because the Law Firm failed to, among other things, attach any writing demonstrating that Mario Regina gave his "informed consent, confirmed in writing." Even if the Law Firm were to have submitted such a writing, it may not be possible, under circumstances here, to show that "the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client", or that the "the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation." (See e.g. Graca v Krasnik, 20 Misc 3d 1127[A], 2008 NY Slip Op 51640[U], at *4 ["Here, the issue giving rise to the conflict of interest, the dismissal of the claim against one defendant shifting liability to the other, rises to a level that full disclosure and consent would not cure."]; see also generally Greene v Greene, 47 NY2d 447, 451-52 [1979] ["Because dual representation is fraught with the potential for irreconcilable conflict, it will rarely be sanctioned even after full disclosure has been made and the consent of the clients obtained]; Tavarez v Hill, 23 Misc 3d 377, 382 [Sup Ct, Bronx County 2009, Victor, J.].)

* * * * *

Similarly, as to the third prong set forth in Rule 1.7(b), although neither the driver Mr. Regina nor the leasing company PV Holding has asserted claims against one another, one cannot say that, had they each had separate counsel, they would not have done so under the facts of this case. In any event, the Court need not offer any opinion as to whether "the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal" since two of the other prongs have not been met.

* * * * *

Since here the Court raised the issue of disqualification on its own, and respecting the general rule that a party is entitled to be represented by counsel of its own choosing (see Dominguez v Community Health Plan of Suffolk, 284 AD2d 294, 294 [2d Dept 2001]), the Law Firm shall, at this time, only be disqualified from representing defendant driver Mario Regina.

Defendant ELRAC moved for summary judgment dismissing plaintiff's complaint based on the Graves Amendment. In support of its motion, ELRAC submitted an affidavit from a regional risk manager for ELRAC, and a copy of the rental agreement between defendant Flakowitz and ELRAC. The regional risk manager's affidavit stated that ELRAC d/b/a Enterprise Rent-A-Car, was an automobile rental organization engaged in the business of renting motor vehicles at the time of the accident.

In granting ELRAC's motion for summary judgment, New York County Supreme Court Justice George J. Silver ruled:

The Graves Amendment, regarding rented or leased motor vehicle safety and responsibility, “bars vicarious liability actions against professional lessors and renters of vehicles," as would otherwise be permitted under Vehicle and Traffic Law § 388 (see Graham v Dunkley, 50 AD3d 55 [2008] ). The statute provides in pertinent part: (a) An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of
the use, operation, or possession of the vehicle during the period of the rental or lease, if (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). The Graves Amendment thus preempts state statutes to the extent that they hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner in actions commenced after August 10, 2005 (see Graham v Dunkley, 13 Misc.3d 790, 792 [2006], Keating v SS & R Management Co., 59 A.D.3d 176,872 N.Y.S.2d 459 [lst Dept 2009]). Accordingly, Defendants' motion for summary judgment is granted, dismissing Plaintiffs summons and complaint against Defendant ELRAC.

Does the failure to plead the immunity contained in the Graves Amendment (49 USC 30106) in the defendant's answer waive said immunity? This court holds that the defendant did not waive the affirmative defense of the Graves Amendment by failing to plead it in its answer because the plaintiff had not been prejudiced by any surprise and had had a full opportunity to litigate the issue before the court.

Defendant BMW Financial Services Vehicle Leasing d/b/a Financial Services Vehicle Trust (BMW Financial) moved for summary judgment based on the Graves Amendment. This action arises out of a motor vehicle accident. One of the vehicles involved in the accident was leased from BMW Financial by defendant, David Kim. There were no specific allegations of negligence on the part of BMW Financial and BMW was not charged with any criminal acts in connection with the accident or this action. Plaintiff argued that because BMW Financial failed to plead the immunity contained within the Graves Amendment as an affirmative defense in its answer, that defense was waived. Plaintiff, however, did not dispute that the Graves Amendment encompasses the defendant had BMW Financial plead it in its answer.

The Graves Amendment precludes liability of an owner of a vehicle who leases or rents a vehicle to another if (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). Plaintiff asserts that as the Graves Act should be considered an affirmative defense that if not plead is waived.

In support of his contentions Plaintiff relies upon cases in which the discovery of an immunity was made on the eve of, or during trial. Further, the immunity was not proven in the cases which plaintiff relies upon. Defendant opposes the plaintiff's motion on the basis that there is no surprise to the plaintiff, federal law preempts state law and that the Graves Act should not be considered a waivable defense.

In this case the Summons and Complaint were filed on April 4, 2009. BMW timely answered, but made no assertion of the Graves Act as an affirmative defense. By correspondence dated October 15, 2009 BMW Financial alerted plaintiff to the applicability of the Graves Act and requested the plaintiff to execute a stipulation of discontinuance based thereon. Plaintiff refused and the instant summary judgment motion was brought by defendant.

Plaintiff has not claimed any surprise from BMW Financial's invocation of the Graves Amendment. Rather plaintiff asserts that raising the defense is technically inappropriate at this juncture. For the foregoing reasons the defendant's motion is granted. First, simply by the name of defendant "BMW Financial Services Vehicle Leasing d/b/a Financial Services Vehicle Trust" it is apparent or at least not surprising that BMW Financial is in the business of leasing vehicles. Second, because BMW alerted plaintiffs early in the litigation of their protected status the plaintiffs can make no viable claim of surprise. Lastly, because BMW Financial raised the affirmative defense in connection with the instant motion the plaintiff has had a full and fair opportunity to address the defense and any prejudice appurtenant to raising this defense for the first time on a motion has been ameliorated.

This court finds that the defendant BMW Financing has not waived the defense of the immunity contained within the Graves Act. The summary judgment motion is granted as to defendant BMW Financing only. The action is severed as to the remaining defendants.

For all posts on this blog about New York court decisions involving the Graves Amendment, click here.

3 comments:

Eddie
said...

Just so I am clear. Based upon the decisions you cite, and particularly Collazo v. MTA which is an Appellate Division case, all a plaintiff has to do is allege negligent maintenance and he or she can get around the Graves Amendment? I know its a crazy concept, but shouldn't plaintiff have to provide some evidence of negligent maintenance when opposing the summary judgment motion?

Collazo involved a motion to dismiss under CPLR Rule 3211(a)(7), rather than a motion for summary judgment pursuant to Rule 3212. A mere allegation of negligent maintenance of a leased or rented vehicle should be enough to defeat a 3211(a)(7) motion, but if discovery is complete and plaintiff cannot submit evidence to create a question of fact on negligent maintenance, 3212 summary judgment should be warranted. Of course, the vehicle owner will need to demonstrate in the first instance on motion that the leased/rented vehicle was properly maintained before the burden of establishing a question of fact shifts to the plaintiff.

Thanks for the clarification Roy. Did not realize that the motion was not your standard 3212 summary judgment motion. Not sure how someone can think they could win such a motion before discovery is complete. Then again, the NYCTA tried to argue the Graves Amendment applies to them and that is one that they had to know they had no chance of winning given the plain language of the statute. Talk about chutzpa!

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